A change in U.S. monetary policy will reduce pressure on the Bank of Canada to cut its borrowing costs as the U.S. consumes about 80 percent of the nation's exports. Canada's central bank before June 10 had cut interest rates at every meeting since December to shield the economy from the U.S.-led slowdown. The Canadian currency has traded near parity with its U.S. counterpart this year.
Canada's dollar strengthened 0.1 percent to C$1.0103 per U.S. dollar at 3:46 p.m. in Toronto, from C$1.0112 yesterday. The currency has gained 1.5 percent this quarter and declined 1.2 percent this year against its U.S. counterpart. One Canadian dollar buys 98.98 U.S. cents.
The currency touched a 2008 low of C$1.0379 on Jan. 22, and a high of 97.12 cents per U.S. dollar on Feb. 28.
All 102 economists in a Bloomberg survey predicted the Fed would keep borrowing costs at 2 percent, leaving Canada with a 1 percentage point rate advantage. The Bank of Canada will probably keep borrowing costs unchanged through at least October, according to a separate Bloomberg survey.
The yield on the two-year government bond was little changed at 3.25 percent after rising as much as 8 basis points, or 0.08 percentage point. The price of the 3.75 percent security due in June 2010 rose 1 cent to C$100.95.